What is a skills taxonomy and why does your organisation need it?

Skills agility is critical for organisations that want to future-proof their workplace. And a skills taxonomy is the foundation on which all this stands.


This playbook is meant to be a guide for organisations that want to develop a skills taxonomy for their workforce as well as those that are simply curious about it and might be seeking to know what they can gain from developing one. 

But before we get to the actual four-step guide to developing a skills taxonomy, we give some context that explains why developing a skills taxonomy is imperative for organisations that want to be successful in an increasingly uncertain world.

Links to each of the sections are given below, so you can skip to any section that interests you first.

  1. The case for developing a skills taxonomy
  2. What is a skills taxonomy?
  3. A skills taxonomy is not a skills inventory
  4. How to design a skills taxonomy
  5. How to use your skills taxonomy in MuchSkills to spot skill gaps
  6. MuchSkills Productivity Optimisation Project
The case for a skills taxonomy

Over the past few years, organisations across the world have increasingly adopted digital technologies, a trend that the Covid-19 pandemic accelerated by three to four years. All this has meant that the skills we need for work are changing rapidly and will continue to do so in the coming years. In this “new normal”, it will be critical for both organisations and workers to stay  agile in terms of skills.

Workers seem to have realised this quite early. Eighty-seven percent of the workers surveyed for The State of American Jobs 2016 report by the Pew Research Centre said they believed that they will need to develop new skills throughout their working lives to keep up with the changes in the workplace. 

It’s a bit different with organisations. More and more organisations are indeed embracing digital transformation – whether whole heartedly or reluctantly. But they need to manage their skills better. And therein lies the problem. Most organisations lack the ability to understand what skills they need for the future of work or even how to acquire them.

A 2020 survey confirmed as much when 53% of respondents told a  Gartner survey that the biggest impediment to a smooth transformation to a digital workforce was the inability to identify needed skills. Organisations are “data blind” to the skills they need to be successful, where they need them and even to the demand and supply of skills within the organisation, an expert warned.

It’s not as if business leaders are unaware of this problem. Business and HR leaders from more than 4,000 organisations surveyed for PWC’s Future of Work and Skills Survey in 2021 said that one of the most significant challenges they faced in the workforce was identifying the skills workers will need in the future due to changing technology. But they indicated they were uncertain about the most effective way to deal with it.

“It’s imperative that businesses make investments in systems that inventory and maintain an inventory of current skills and that support visualisation of gaps in future skills,” the report recommended.

Weak skills management – the inability to identify skills needed and efficiently use them – is costly because it hits organisational efficiency and hurts productivity and profits. When it adds up, it can hit economies hard. In the UK, for instance, skills shortages cost £4.4 billion a year in higher salaries, recruitment costs and temporary staffing bills, according to a 2019 estimate.

But what does this have to do with a skills taxonomy, you may wonder?
We are getting to the point. Do read on.

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What is upskilling?

Skills-based workplace

The needs of the workforce in this “new normal” and in the future will be well served by shifting from a roles-based workplace to a skills-based one, suggest experts.

A skills-based system of work could “provide more efficient mechanisms by which employers can identify the talent they need for business to flourish but can also create fairer labor markets where individuals are able to rapidly transition between roles; have greater access to learning opportunities; and be matched to employment through unbiased and skills-based evaluation,” said a 2021 World Economic Forum (WEF) report titled Building a Common Language for Skills at Work A Global Taxonomy.

This report also warned that organisations weren’t adequately prepared for the future of work: “Current systems of learning and signalling job-fit do not provide the agility that lifelong learners will require, and we find ourselves at a defining moment to make skills the currency of the labor market.”

Did you know?

Automation is expected to displace 85 million jobs till 2025 while creating 97 million new ones according to a WEF report from October 2020. While that sounds like not so bad news, the report said at least half of existing employees will have to be reskilled or upskilled to handle those jobs.

What is a team?

Moving to a skills-based system of work

A skills-based system of work isn’t an entirely new concept.

Want to know more about why you should move to a skills-based workplace, check out this resource:

50 statistics that explain why skills should be every CEO’s top priority

Read more

For decades, organisations across the world have used the skills data they had (however limited) to make decisions about who to hire, who to send for training, who to move to a particular department because their skills will be better utilised there, as well as who to promote and who to give a pay raise to.

Shifting to a workplace that is entirely skills-driven holds several advantages for both workers and employers. It helps the organisational leadership to identify the skills they need to be successful, allowing them to efficiently reskill, upskill and redeploy internal talent. It also gives workers the ability to easily transition between roles in a rapidly changing work environment.

“New data-driven methods demonstrate the power of using a skills-based approach to reskill, upskill and redeploy talent,” said the WEF’s global taxonomy report. “Breaking job roles down into required skill sets can allow employers to better understand viable job transition pathways based on the level of similarity in the skills required for different roles, and can enable employers to make more informed decisions on the kind of reskilling and upskilling required to support those transitions.”

Developing a skills taxonomy – described as the foundational building block of a skills-based approach – is a key part of moving to a skills-based system of work. And any organisation that is looking at securing its future must consider developing one.

What is a skills taxonomy?

A taxonomy of any kind is a scheme of classification, a way of organising information.

In the context of business, we would say a skills taxonomy is a detailed list of all the skills that your organisation needs to meet its business goals.

Here are some definitions:

“A skills taxonomy is a structured list of skills defined at the organization level that identifies the capabilities of a business in a quantifiable way.”

Source: AIHR

“Skills taxonomies offer a way to manage and identify the skills that make your business and your employees successful.”

Source: Linkedin Learning

According to experts, a skills taxonomy enables strategic workforce planning, leads to increased operational efficiency because of optimised resource allocation, drives learning and development programs, facilitates internal mobility and facilitates the hiring process.

Several country/region/industry skills taxonomies exist. They include:

A skills taxonomy is not a skills inventory

Do remember that a skills taxonomy is different from a skills inventory.

A skills inventory is a detailed list of all the skills and educational qualifications available in the organisation. These are not necessarily the skills your organisation specifically needs to be successful and may not even be relevant to your business goals.

Why does your organisation need a skills taxonomy as well as a skills inventory?

Here’s how creating a skills taxonomy helps organisations to be successful.

Skills power organisations and help us attain our business goals. When we are aware of both – the skills we need for our organisation to be successful (via a skills taxonomy) and the skills we currently have (via a skills inventory) – we can ascertain if our available skills are sufficient to help us achieve our current and future business goals. This enables us to take remedial action such as upskilling, learning and development or recruitment  to bridge any skill gaps.

Of course, as the market, organisation and your business goals evolve, you’ll need to update both easily, which is why it is important to seriously consider what form your taxonomy or inventory will take – digital or analog.

How to design a skills taxonomy

Depending on the size of your organisation, creating a skills taxonomy might seem a daunting task, one that you might want to put off indefinitely. But that would prove short-sighted. In the long-term, a skills taxonomy will pay you back manifold in terms of increased operational efficiency and productivity.

Below, we will discuss two main approaches to designing a skills taxonomy. The overall idea is to start small – mapping the skills of roles that are critical to the success of an organisation or identifying a critical department and then mapping all the skills that the department must possess to be successful. Once the project team understands the concept better, you can expand it into the rest of the organisation

At the very end, we will discuss how you can use MuchSkills’ ‘Custom Skills’ function to craft a skills taxonomy for your organisation and then use that as a baseline to conduct a skills gap analysis that will help you identify skill gaps so that you can take relevant action.

Cute Unicorn Cat Illustration for MuchSkills

“There is only one way to eat an elephant: a bite at a time.”

– African proverb

Four steps to design a skills taxonomy

The four steps

  1. Form a skills taxonomy project team
  2. The project team should meet to get answers to the following question: What are the key problems a skills taxonomy will help us fix?
  3. Decide what skills will be mapped first.
  4. Build a skills inventory (if you don’t already have one)

Step 1: Form a skills taxonomy project team

Members of the team should include representatives of key stakeholders who will benefit from this project. Having representatives from all sections of your organisation in this team will ensure that all departments are on the same page with regard to understanding the taxonomy and its aims, as well as implementing it.

Step 2: The project team should meet to get answers to the following question: What are the key problems a skills taxonomy will help us fix?

The answers to this question will be a list of how your organisation stands to benefit if it creates a skills taxonomy. These benefits could be anything – from identifying which employees to train or easily upskill so that they can take more responsibility or fit into a vacant role, or redeploying internal talent efficiently so that you don’t have to expend resources to hire. 

Below is a list of the various benefits of crafting a skills taxonomy in no particular order of importance:

  • Increasing productivity for key roles

    By identifying skill gaps for employees in key roles, organisations can help them undergo training so that they can acquire new knowledge and skills to increase their productivity and well being. 
  • Design learning & development programs more efficiently

    When we understand what skill gaps in the organisation are, we can create learning paths/journeys to guide employees on how they can upskill to be better at what they love to do. 
  • Make clear what skills are required for each role

    When employees move around in the organisation they learn, grow and develop. When we clearly define the skills needed for each role, we help employees understand what roles could be a good fit for them. 
  • Internal recruitment

    When you know what skills you need in a role and you also have a skills inventory of all employees, you can use skill mapping to quickly identify employees who could be a good fit for vacant roles, saving yourself time and financial resources that would otherwise be spent in finding an external candidate. 
  • Identify software adoption issues

    Software usage or skill level are key for productivity. Use skill mapping to identify the software proficiency of your employees. If you find any skill gaps, launch education programs to help employees use the software more optimally and efficiently. 
  • Identify digitalisation opportunities

    By mapping employees’ software usage and their core tasks, we can identify if they are using the most suitable software and technology to get the job done. If employees are using outdated solutions, organisations can start digitalisation projects to help employees implement updated and more efficient work processes and tools. 
  • Identify upskilling opportunities for functional skills 

    Your organisation requires everyone to have a certain set of key functional skills to be successful. Map the skills and skill levels so you can identify where additional education and training is needed.
  • Team/department skill distribution mapping

    Review skill distribution and skill levels for a department or team so that you can understand if you need to recruit more people or just upskill and train existing employees. In addition, identify skill gaps and efficiency issues. 
  • Knowledge level of your product/service 

    Ascertain how well your own employees understand your product or service and identify opportunities for training. For instance, are all members of your customer support group experts in the software they are supposed to help customers out with?

Step 3: Decide what skills will be mapped first.

Mapping the skills of the whole organisation seems a daunting task so it’s best to break the exercise down into bits. The project team could use two methods to proceed. 

Method 1: Focus on critical roles – Identify critical roles and who the best performers are in these roles and map their skills first

Method 2: Focus on critical teams or departments – Identify critical teams or departments and then identify the critical skills per team or department starting from the most important one.

Whatever the method chosen, the project team should then find answers to the following questions:

  • What are the key softwares/methodologies must employees in this role/team/department be conversant with? What is the level of expertise required?
  • What are the key people skills employees in this key role/team/department need to function efficiently every day? What is the level of expertise required?
  • What are the key jobs or action specific skills employees in this key role/team/department should have? What is the level of expertise required?

The results of this exercise will give you a skills taxonomy for your top roles/critical departments. Once you implement and prove this concept in the selected segments, you can slowly expand the exercise across the organisation at the end of which you will also get an organisation-level skills taxonomy.


Take inspiration from the regional and country-specific taxonomies mentioned in the section above to speed things up. In fact, we recommend that one of the first things the project team should do is to scan any country or region-specific taxonomy to get an idea of what a detailed skills taxonomy looks like. These resources usually have a search function where you can type in the name of a particular role to view all the associated skills, skill categorisations and descriptions. To speed up the process of identifying critical skills and describing them accurately, you can then pick and choose what you need. For example, to view the O*Net summary for IT Project Managers, click here.

Step 4: Build a skills inventory (if you don’t already have one)

A skills inventory is a detailed list of all the skills and educational qualifications available in the organisation. As mentioned above, when you have both a skills taxonomy (the skills an organisation needs to be successful) and a skills inventory (the skills in the organisation at this particular point of time), you can conduct a skills gap analysis that will reveal any critical skills you lack. This will help you determine your future course of action be it training, learning and development or hiring.

In the next section, we will talk about how you can deploy your skills taxonomy on MuchSkills skills management platform to conduct a skills gap analysis.

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How to use your skills taxonomy in MuchSkills to spot skill gaps

For this section, we assume you are already a MuchSkills user. If you aren’t, here are a few tutorials you might want to read first:


Once you are up to speed about how to use MuchSkills (and if you are already using MuchSkills) you can use ‘Custom Skills’ to list your skills taxonomy.

Step 1: Create custom skills where you input your skills taxonomy – the skills you have determined are critical to your organisation

In MuchSkills, click on ‘TEAM/ORG’ in the top menu and then click on the ‘Settings’ tab on the right. Click on ‘Manage Skills’ and then ‘+ Skill Category’. Add a name for your skill set – let’s call it ‘Essential Skills– and choose the sector chart. If you are not so keen on measuring skill levels but would like to collect interest-based or experience-based data instead, then use the bubble chart visualisation where users can quickly list and rank their experience/interest in a domain or subject. 

Note: You can make custom skill categories for several critical skill categories but it’s best not to add too many because that can be overwhelming for your employees. Below are some suggestions for custom skill categories along with examples of those skills:
  • Essential Skills – Conflict handling, empathy,  interpersonal skills, delegation skills
  • Methodologies – Prince2,  Agile methodology, PMBOK, Scrum Master
  • Functional Skills – Documentation and writing skills, unit testing, acceptance testing, giving training/demos on product
  • Languages – English, Mandarin, French, Spanish etc

Step 2: Add the critical skills along with descriptions

One by one, add the skills you have ascertained are critical for the success of your organisation, a description of those skills, which department’s members should select the listed skills, and whether the skill is mandatory.

Important: Do remember that skill descriptions are an important part of a skill taxonomy. The more specific you are here, the less the chances of individuals interpreting it differently. Specific skill descriptions in your taxonomy will help you get a more accurate picture of skills growth or gaps if any. 

For more details on how to use the ‘Custom Skills’ function, go to this guide: How to set up custom/company specific skills for your organisation

Step 3: Ensure your skills inventory on MuchSkills is updated

Once you have populated your custom skills, you have a baseline in terms of the skills your organisation must have to be successful. You can now compare the skills available in your organisation (your skills inventory) against this baseline to identify any skill gaps and take remedial action. So, do get your employees to map their skills on MuchSkills if they haven’t already because that will be your skills inventory.

Step 4: Conduct a skills gap analysis

Finally, conduct a skills gap analysis. Here are two resources you can use to help you along the way:

Playbook: Skills Gap Analysis: A complete guide

To conduct a skill analysis on MuchSkills watch this video: How to conduct a skill analysis and skills gap analysis

Why you really, really need to conduct a skills gap analysis

Imagine your company provides a unique consulting service that uses your own proprietary software to help your customers. You are curious about how well your own team knows the software itself. On doing a skill mapping on MuchSkills you realise, just 10% of your workforce are experts in a software that is core to your business 🙀. You need to fix that ASAP, right?

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MuchSkills Productivity Optimisation Project

Is all of this too much work for you?

At MuchSkills, we can help you define the key skills of your entire organisation or specific key departments, teams and roles and also conduct a skills gap analysis with recommendations.

In a set of workshops we will define the organisation’s skill taxonomy and the skills required for key roles. We break them down into smaller chunks to make it clear exactly what the skills consist of. The assessment will include any custom skills as well as MuchSkills out-of-the-box skill categories such as job focus, soft skills, technical skills and certifications.

Once we help you create a skills taxonomy, using a proven methodology we will collect skill and skill level data through an employee self-assessment mapping. All data will be collected using the MuchSkills tool and will be readily available for the organisation after the project.

Using the collected data, we will analyse your current skills state to identify:

  • Software adoption issues
  • Behavioral skill gaps
  • General skill gaps
  • Department/team skill gaps
  • Key role skill gaps
  • General productivity opportunities
Learn more
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